As geographic barriers to new markets and new sources of supply continue to disappear, organizations are doing business on an increasingly wider scale, frequently, throughout the world. One consequence of doing business in many locales is an increase in the complexity of an organization's procedures designed to facilitate tax compliance. Because of political boundary variations, changing laws and regulations, new forms of products, and new business innovations, transaction taxes and tax compliance represent a substantial part of any organization's cost structure. In the United States alone, there are over 7,500 tax jurisdictions, including states, cities, counties, and subsections of cities and counties. The location of an organization's warehouses, stores, and/or customers may all impact the organization's tax obligations as it does business electronically, or via traditional “brick and mortar” mechanisms.
Transaction taxes generally relate to the transfer (i.e., the purchase or sale) of goods and/or services. Special transactional taxes may exist in various locales for certain types of goods (e.g., alcohol may by subject to an excise tax, or communications services may be subject to a telecom tax), but generally, there are three main categories of transactional taxes: Turnover tax; sales and use tax; and, value added tax. While all three categories of taxes represent a tax on the sale of supplies (i.e., goods and/or services), they differ in many important ways, such as how the tax is calculated and to whom the tax is owed, thereby further complicating tax compliance procedures and reporting. In addition, considerations such as exemptions, specially negotiated rates, and the like, must be taken into consideration by an organization's tax professional in order to prevent miscalculation of taxes, which may lead to overpayment, or penalties for underpayment.
As an organization's scope of business and geographic footprint expand, it becomes increasingly difficult to consolidate data and tax information corresponding to transactions taking place at varying locations throughout the organization, or in conjunction with a variety of business applications. Current tax computation and management tools are capable of being integrated with only a single business application. As a consequence, an organization having multiple business applications, or multiple locations, requiring transactional tax calculations, must incur substantial up-front costs to integrate existing point solutions for tax compliance with each application or physical location. Furthermore, even in organizations with existing, separate point solutions, there is no mechanism to facilitate an integrated reporting scheme without expensive and cumbersome customization, thereby unnecessarily increasing the workload of the organization's tax professional on simple compliance and reporting issues.
Having dispersed, non-synchronized records, generated by separate point solutions integrated with individual business applications increases the time spent by the tax professional dealing with the collection and consolidation of tax-related information in order to report and remit taxes to a variety of taxing authorities. Time spent collecting, consolidating, updating, and reporting tax compliance information substantially diminishes the time spent on tax strategy, which may result in an unnecessary drain of valuable resources.